PG&EAppendix E1 – CAES Agreement Term Sheet
2015 CAES RFOMarch 30, 2016
CAES Power Purchase Agreement Term Sheet
As described in the Protocol, PG&E invites input from Participants on the commercial structure proposed in this term sheet. The proposed structure generally is based on PG&E’s Energy Storage Agreement and Tolling Agreement. PG&E requests that Participants review the entirety of the Energy Storage Agreement and Tolling Agreement for additional details and further information; the summaries contained herein are provided for convenience only.
Topic / Summary of TermsExpected Initial Delivery Date (EIDD)
Initial Delivery Date (IDD) / The EIDD is the date on which Seller expects the Delivery Term to begin.
The IDD is the actual date on which the Delivery Term begins. It is the first day of the calendar month immediately following the calendar month in which all Conditions Precedent have been met; provided that, the IDD cannot occur before the EIDD. Buyer has a termination right if IDD has not occurred by 12/1/2024.
See Energy Storage Agreement, Section 1.1.
CPUC Approval / The CAES Agreement will become effective whenPG&E receives final and non-appealable CPUC Approval of it, as requested by PG&E without any conditions, restrictions or modifications. If CPUC Approval has not occurred on or before 365 days from the date on which Buyer files the Agreement with the CPUC seeking CPUC Approval, then either Party may terminate the Agreement.
See Energy Storage Agreement, Section 1.3.
Credit / Cash, Letter of Credit, or Guaranty (note: any proposed Guaranty shall be subject to Buyer’s acceptance in its sole discretion; furthermore, any accepted Guaranty may be applied only towards the Delivery Term Security.)
See Energy Storage Agreement, Section 12.
Project Development Security / $15/ kW of Design Dmax at ROC at execution of the CAES Agreement plus an additional $45/kW of Design Dmax at ROC to be posted eleven months after CPUC Approval. Seller’s termination damages to be paid to Buyer for an Event of Default prior to IDDwill not exceed the required posted amount of Project Development Security. Note: these credit provisions may be modified to reflect credit amounts proportional to storage energy (MWh) or a combination of capacity and energy.
See Energy Storage Agreement, Section 12.
Reference Operating Conditions (ROC) / Reference Operating Conditions are: 60 F ambient temperature, 60% relative humidity, 0 Run Hours (new and clean) and the Stored Air Mass and Reservoir Pressure as specified by Seller for 0% State of Charge.
Delivery Term Security / The greater of (a) $125.00/kW of Design Dmax at ROC or (b) 10% of the sum of the highest estimated Monthly Fixed Payments for any 36 month period.Note: these credit provisions may be modified to reflect credit amounts proportional to storage energy (MWh) or a combination of capacity and energy.
See Energy Storage Agreement, Section 12.
Seller Termination Right / Seller has a no-fault termination right that may be exercised at any time until that date which is three hundred sixty-five (365) days after the date that PG&E receives CPUC Approval of the CAES Agreement.
Seller Reduction Right / Seller may decrease the Project capacity rating by up to 50%before 12/31/2019, provided that such reductionshall (a) result in the same proportional changes to the MCC values;(b) not decrease for the Project: the ratio of the Project’s Design Cmax to the Design Dmax,the Discharge Power Density, the ancillary service capabilities per MW of Design Dmax or Design Cmax, or the ramp rates;and,(c) not increase for the Project: the ratio of the station loads to Design Dmax, the Compression Effectiveness, the Heat Rate, the performance degradation rates, or the startup and shut down times.
Construction Milestones / There are three (3) critical milestones: (1) Buyer’s review of the Site Safety Plan prior to finalization of Project Design, (2) the Guaranteed Construction Start Date (GCSD), and (3) the EIDD.
The GCSD may be extended by no more than three hundred sixty-five (365) days. If the GCSD is not achieved after such extension, then the Seller is subject to an Event of Default.
The IDD may be extended to the earlier of (A)three hundred sixty-five (365) daysafter the EIDD and (B) 12/1/2024.
See Energy Storage Agreement, Section 13.
Delay Damages / If the IDD occurs after the EIDD for any reason other than an Event of Force Majeure (and excepting any delay solely due to Buyer’s review of the Site Safety Plan), then Seller will pay Buyer Delay Damages of $160.00/day per MW of Design Dmax at ROC.
Regardless of the reason for delay, Buyer has the right to terminate the CAES Agreementand pursue and collect damagesfrom Seller arising from such termination if the Project does not achieve IDD by 12/1/2024; provided that, Seller will not be liable for damages if such failure solely is due to an Event of Force Majeure.
See Energy Storage Agreement, Section 13.
Purchase and Sales Obligation,
Exclusivity / Buyer has rights to all Product produced by the Project, regardless of contractual amounts specified. For example, if the Project’s Net Qualifying Capacity is greater than the monthly capacity, Buyer still may claim the larger amount.
See Energy Storage Agreement, Section 2.1- 2.3.
Resource Adequacy (RA) / Seller will take all actions (a) to ensure that the Project qualifies to provide RA and (b) to provide all of the Project’s RA Capacity during the Delivery Term.
The Project must have Full Capacity Delivery Status by the IDD.
See Energy Storage Agreement, Section 2.2.
Compensation to Seller for Product / Compensation for Product will equal the sum of all of the following as determined on a calendar month basis for the applicable calendar month:
- Monthly Fixed Payment;
- Monthly Variable Payment;
- Start-Up Payment;
- Deviation Charges, Forced Outage Compensation, and Other Deviation Charges;
- Monthly Efficiency Adjustment;
- Gas Balance True-Up;
- GHG Compensation; and
- Any other compensatory adjustments as required by the CAES Agreement.
Monthly Fixed Payment / The amount of Seller’s Monthly Fixed Payment depends on the Project’s ability to meet guaranteed performance measures. The base formula for calculating the Monthly Fixed Payment is:
MFPm = [[CPP x MAFm x MCCm] x AAm] x (1+DEA)/2
CPP= Capability Payment Price, $/kW-yr
MAF= Monthly Allocation Factor
MCC= Monthly Contract Capability, kW
AA= Availability Adjustment
DEA = Discharge Energy Adjustment.
Capability Payment Price / Yearly rates for the Monthly Contract Capability ($/kW-yr) including fixed O&M.
Monthly Allocation Factor / Buyer specified factorsthat will allocate the yearly Capability Payment Price across each calendar month. The factors may vary between 4-15%.
Monthly Contract Capability (MCC) / At IDD, the MCC will be the sum of (1) the Design Dmax and (2) the Design Cmax, at 0% SOC and at the following monthly ambient temperatures (deg F).
January / 57
February / 62
March / 68
April / 74
May / 82
June / 90
July / 94
August / 93
September / 90
October / 78
November / 66
December / 56
The MCCs may be adjusted depending on the results of the Performance Tests.
Availability Adjustment (AA) / To the extent the Project is not capable of charging, storing, or discharging energy for unexcused reasons, the Availability will be reduced. Excused Scheduled Maintenance Hours and Force Majeure hours that do not exceed the amount of Excused Hours will not reduce Availability. Any deratessolely due to ambient conditions or State of Charge changes from Buyer’s Schedule will not reduce Availability. Unavailable non-energy products will reduce Availability, but based on a percentage of the unavailable product hours. Seller will report Availability for both Charging and Discharging sides. The Availability Adjustment calculation will be the lesser of the Availability calculated for Charging and the Availability calculated for Discharging.
For the first two (2) Contract Years in the Delivery Term:
- If Availability is greater than or equal to 98%, then AA=100%;
- If Availability is less than 98%, thenAA = Availability.
- If Availability is greater than or equal to 98%, then AA=100%;
- If Availability is less than 98%, but not less than 70%, then
- If Availability is less than 70% then AA=0.
Discharge Energy Adjustment / Discharge Energy is the total MWh the Project can discharge from 100% to 0% SOC. Seller specifies the pounds of air in the reservoir that correspond to 100% and 0% SOC.
The Discharge Energy Adjustment is the ratio of the tested Discharge Energy to the expected Discharge Energy corrected to the average ambient conditions during the test. Buyer will have the right to test the Discharge Energy during the Performance Tests. If the tested Discharge Energy is less than the expected Discharge Energy, there will be a reduction to the Monthly Fixed Payment (Discharge Energy Adjustment) until Seller demonstrates a tested Discharge Energy greater than or equal to the expected Discharge Energy in a subsequent Performance Test.
Monthly Variable Payment / MVPm = VOM payment ($/MWh Discharged) + Discharge Operating Hours payment ($/ fired hour) + Charge Operating Hours payment ($/ fired hour).
All payments are based on the lesser of scheduled and actual energy or operating hours.
To the extent necessary, Seller will substantiate that variable costs reflect actual cost of operation as needed with the CAISO. The parties will discuss contract terms to ensure that variable costs are acceptable to the CAISO.
Start-Up Payment / The Start-Up Payment will be based on Seller specified rate for hot, warm, and cold successful start-ups that are part of Buyer’s schedule.
Seller may have separate Start-Up Payments for compression and generation.
Monthly Efficiency Adjustment / The Monthly Efficiency Adjustment, which is described in greater detail in the formula at the end of the termsheet, is a way to capture CAES specific guaranteed performance measures:
- Compression Effectiveness
- Reservoir Self Discharge rate; and
- Discharge Power Density
The Discharge Energy Shortfall is the difference between the expected discharge MWhand the actual discharged MWh, where the expected discharge MWhs are based on actual MWhs charged, the expected reservoir self-discharge rate, the actual net change in SOC of the reservoir, and the actual operating conditions (ambient temperature, SOC, run hours) for the applicable calendar month.
The Design Performance Spreadsheet will be used to calculate the expected monthly Compression Effectiveness and expected monthly Discharge Power Density, both of which will be used in the Monthly Efficiency Adjustment calculation throughout the Delivery Term.
- Inputs to the Performance Spreadsheet, for each settlement interval: RT ambient conditions, SOC, equivalent run hours, Buyer’s Schedule
- Outputs: expected Compression Effectiveness and expected Discharge Power Density for each settlement interval
Design Performance Spreadsheet / For the purpose of establishing the initial expected performance of the Project, Seller shall provide a spreadsheet program (“Design Performance Spreadsheet”) that models the performance parameters provided in the Offer Form and duplicated in Appendix II of the PPA. The Design Performance Spreadsheet will always be used for the Gas Balance True-up and the Monthly Efficiency Adjustment throughout the Delivery Term.
Seller will provide the Design Performance Spreadsheetin a specified time prior to contract execution. If Seller exercises Seller’s right to decrease the project Capacity by 12/31/19, Seller will provide an updated Design Performance Spreadsheet within a specified time; however, changes to the operating parameters will be restricted as described above in Seller Reduction Right.
The Design Performance Spreadsheet calculates parameters in the Offer Form as a function of operating conditions, including:
- Expected Dmax = function (Ambient Temperature, SOC, equivalent run hours)
- ExpectedDmin = function (Ambient Temperature, SOC, equivalent run hours)
- ExpectedCmax = function (Ambient Temperature, SOC, equivalent run hours)
- ExpectedCmin = function (Ambient Temperature, SOC, equivalent run hours)
- Expected Compression Effectiveness (MWHC/106lb-air) = function (ambient temperature, Buyer’s Charge Schedule, SOC, Total Run Hours)
- Expected Discharge Power Density (MWHD/106lb-air) = function (ambient temperature, Buyer’s Discharge Schedule, SOC, Total Run Hours)
- Expected Heat Rate = function (ambient temperature, Buyer’s Discharge Schedule, SOC, Total Run Hours)
- Expected SOC at the end of the Settlement Interval = function (SOC, Buyer’s Charge Schedule, Buyer’s Discharge Schedule)
- Expected Reservoir Self Discharge for the Settlement Interval = function (SOC)
To the extent that actual performance is better than design performance, Seller’s additional compensation is limited to the Gas Balance True-up.
Prior to IDD, PG&E must approve theDesign Performance Spreadsheet, which should be validated against data points in Appendix II.
Operating Performance Spreadsheet / Throughout the Delivery Term, Seller shall provide Operating Performance Spreadsheets that reflect the current expected operating capabilities of the Project. The Operating Performance Spreadsheets shall be in the same format as the Design Performance Spreadsheet. Seller shall provide an updated Operating Performance Spreadsheet whenever the current version is less than 98% accurate. The Operating Performance Spreadsheet shall not be used for either the Gas Balance True-up or the Monthly Efficiency Adjustment.
Heat Rates / Seller to provide heat rates as a function of ambient temperature, load level, run hours and SOC in the Design Performance Spreadsheet.
Deviations from contractual heat rates will be settled via the Gas Balance True-up.
- The Design Performance Spreadsheet will be used to calculate the heat rate to be used for the Gas Balance True-up
- Inputs to the Design Performance Spreadsheet: RT ambient conditions, SOC at beginning of interval, equivalent run hours at beginning of interval, Buyer’s Discharge Schedule for Settlement Interval, Delivered Energy for Settlement Interval
- Outputs: Expected heat rates for each Settlement interval for Buyer’s Discharge Schedule and Delivered Energy
Gas / Buyer will provide gas for Buyer’s Schedule at the contractual guaranteed heat rates. Seller is responsible for gas requirements other than those needed to satisfy Buyer’s Schedule. Seller will reimburse Buyer for gas use that is higher than the contractual heat rates. If the actual heat rates are lower than the contractual heat rates, Buyer will pay Seller for 15% of the imbalance.
See Tolling Agreement, Section 3.3.
GHG / Buyer will financially compensate Seller for those costs Seller incurs that are directly and exclusively tied to Seller’s compliance with AB32 obligations related to the Scheduled Operations. As between Buyer and Seller, compliance with any and all AB32 obligations shall be Seller’s exclusive responsibility.
The quantity for compensation will be the lesser of actual Gas used and a calculation based on Buyer’s Schedule or delivered energy, based on a rate of .05302 tonnes per MMBtu. The Allowance Price is the ICE Index price for the day of dispatch.
See Tolling Agreement, Section 9.3 as pertaining to financial compensation.
Schedule Deviations / Seller is responsible for uninstructed energy deviations and instructed deviations due to Forced Outages (for both for charging and discharging). Seller is also responsible for any non-performance associated with other, non-energy Products.
See Energy Storage Agreement, Section 3.4 and Tolling Agreement, Section 3.5.
Charge Energy / Buyer will provide Charge Energy for Buyer’s Charge Schedule to Electrical Delivery Point.
Buyer is responsible for Charge Energy associated with the pounds of air withdrawn for Buyer’s Discharge Schedule and for Seller’s specified Reservoir Self-Discharge Rate. Any other Energy required, e.g., for maintaining Reservoir Pressure or any other operational needs, is Seller’s responsibility and will not be part of Buyer’s Schedule. In addition, if Seller requires venting of air or reduction of pressure, Seller is responsible for the costs to restore the Reservoir Pressure or the air vented.